A court ruling Monday might spare BP PLC from making hundreds of millions of dollars in compensation payments stemming from its 2010 oil spill.

A federal-appeals-court ruling late Monday might spare BP PLC from making hundreds of millions of dollars in compensation payments stemming from its 2010 Gulf of Mexico oil spill.

The Fifth U.S. Circuit Court of Appeals said a lower-court judge in New Orleans must address whether companies seeking payouts from a 2012 settlement actually suffered damage that directly stemmed from the oil spill. That judge, Carl Barbier, had argued he only needed to ensure the court-appointed administrator overseeing the settlement was using...